Earlier this year the FCC offered the nation’s largest price cap carriers nearly $1.7 billion annually for six years to bring broadband to parts of their local service territories currently lacking that service. Carriers accepted or declined funding on a state-by-state basis — and while most carriers accepted most of what was offered, funding aimed at nearly 450,000 locations was declined and will instead be awarded based on a competitive bidding process. Funding will go to the provider that offers to deploy broadband at the lowest level of support.

CAF Auction Plans
As Telecompetitor previously reported, carriers were offered an average of $411 per line annually in the CAF program. Perhaps not surprisingly, the lines for which carriers accepted funding had a bit higher level of support associated with them – about $414 on average, according to our latest analysis. As a result, the average funding per line for the auction will be about $390.

Auction rules call for winners to receive no more funding per line than was initially offered to the price cap carrier. Price cap carriers also will be allowed to bid in the auction – and unlike with the initial funding offer, they will not have to agree to provide service to all unserved locations targeted in a state.

The total amount of money to be auctioned – and possibly the total number of locations — may be higher than what is shown in Telecompetitor’s minimum funding analysis. The reason is that the FCC has signaled that it may move some money originally targeted for a mobility fund into the regular CAF program or into a remote areas fund. If money were moved into the regular CAF program, potentially the number of locations targeted would also be expanded, perhaps by shifting locations currently targeted for the remote areas program. That program calls for serving the highest-cost locations using broadband wireless or satellite broadband.

No Capex From Price Cap Carriers
In offering funding to the price cap carriers in the CAF program, the FCC did not require the carriers to allocate any money from their own capex budgets to the CAF deployments – and at least three of the price cap carriers accepting funding have indicated that they expect the CAF funding to cover deployment costs. At financial conferences over the last 10 days, executives from CenturyLink, Frontier, and Windstream said they are not allocating capex toward CAF construction beyond what is coming from the FCC. And Telecompetitor is not aware of any price cap carrier that has said it will allocate some of its own capex toward CAF deployments.

The upshot is that competitive carriers interested in serving rejected areas could have a good shot at winning funding in the CAF auction if they are willing to pony up some funding of their own toward the deployments.